ICRA Report: Global LNG Prices Boost Indian Gas Market
ECONOMY & POLICY

ICRA Report: Global LNG Prices Boost Indian Gas Market

In CY2023, global liquefied natural gas (LNG) prices exhibited a moderation trend after reaching record highs in CY2022. This shift was influenced by the expected growth of domestic consumption, projected to increase by 6-7 percent year-on-year. A report from ICRA attributed this trend to alterations in demand patterns among key consuming nations, including China, the European Union, Japan, South Korea, and the United States.

The report by ICRA noted that LNG demand in China had weakened due to an economic slowdown, increased Russian pipeline supplies, and a rising reliance on coal. In the European Union, demand stabilized after an initial peak, attributed to milder winters, austerity measures, and an unfavorable economic climate. Japan and South Korea also experienced tepid demand due to their heightened emphasis on renewable energy and nuclear power. Conversely, the United States observed subdued domestic demand, and the presence of ample gas reserves resulted in a moderation of Henry Hub prices.

Sabyasachi Majumdar, Senior Vice President and Group Head of Corporate Ratings at ICRA Ltd, remarked that "Soft LNG prices are favorable for Indian gas consumers."

Nevertheless, he cautioned against event risks such as extended labor strikes in Australian LNG facilities and unexpectedly cold winters in the northern hemisphere, which could introduce volatility into spot prices.

Majumdar added, "Considering the limited investments in LNG projects in recent years, the availability of LNG will remain constrained until significant capacity additions are expected in FY2025-26. Meanwhile, structural shifts are occurring on the demand front, including the EU's growing focus on renewable energy, China's preference for coal, and Japan and South Korea's increased reliance on nuclear power. South Asian countries' LNG consumption remains highly sensitive to price fluctuations."

Similar to global gas markets, the Indian gas utilities sector, which encountered substantial price volatility and LNG availability challenges in the past two years, is now transitioning toward a state of relative stability. The report noted that softening LNG prices, increased domestic gas supplies, and government regulatory initiatives supported domestic market gas uptake. The report also anticipated robust growth in domestic production, particularly from the Krishna-Godavari Basin, which is expected to reduce reliance on LNG. The city gas distribution (CGD) and fertilizer sectors will continue to drive demand growth, aided by favorable policy support.

ICRA anticipated a healthy upturn in demand from the industrial sector due to soft LNG prices and rising domestic gas production. They also noted the positive impact of the Kirit Parikh Committee recommendations implemented in April 2023, which lowered domestic gas prices and improved the cost competitiveness of compressed natural gas (CNG) and piped natural gas (PNG) compared to alternative fuels.

Sabyasachi Majumdar concluded by stating that "Gas consumption in India is projected to grow by 6-7 percent year-on-year in FY2024, building upon a low base, supported by softer LNG prices and increased domestic gas production. The fertilizer sector will remain the largest consumer, bolstered by the commissioning of new fertilizer plants in H2 FY2023. The CGD sector, particularly the CNG segment, will continue to thrive due to its economic advantages over alternative fuels, as evidenced by strong growth in CNG vehicle sales in recent years."

See also:
Bangladesh Set to Receive LNG Shipments in September and October
Indian Energy Exchange May trade volume rises 8% to 8,251 MU

In CY2023, global liquefied natural gas (LNG) prices exhibited a moderation trend after reaching record highs in CY2022. This shift was influenced by the expected growth of domestic consumption, projected to increase by 6-7 percent year-on-year. A report from ICRA attributed this trend to alterations in demand patterns among key consuming nations, including China, the European Union, Japan, South Korea, and the United States. The report by ICRA noted that LNG demand in China had weakened due to an economic slowdown, increased Russian pipeline supplies, and a rising reliance on coal. In the European Union, demand stabilized after an initial peak, attributed to milder winters, austerity measures, and an unfavorable economic climate. Japan and South Korea also experienced tepid demand due to their heightened emphasis on renewable energy and nuclear power. Conversely, the United States observed subdued domestic demand, and the presence of ample gas reserves resulted in a moderation of Henry Hub prices. Sabyasachi Majumdar, Senior Vice President and Group Head of Corporate Ratings at ICRA Ltd, remarked that Soft LNG prices are favorable for Indian gas consumers. Nevertheless, he cautioned against event risks such as extended labor strikes in Australian LNG facilities and unexpectedly cold winters in the northern hemisphere, which could introduce volatility into spot prices. Majumdar added, Considering the limited investments in LNG projects in recent years, the availability of LNG will remain constrained until significant capacity additions are expected in FY2025-26. Meanwhile, structural shifts are occurring on the demand front, including the EU's growing focus on renewable energy, China's preference for coal, and Japan and South Korea's increased reliance on nuclear power. South Asian countries' LNG consumption remains highly sensitive to price fluctuations. Similar to global gas markets, the Indian gas utilities sector, which encountered substantial price volatility and LNG availability challenges in the past two years, is now transitioning toward a state of relative stability. The report noted that softening LNG prices, increased domestic gas supplies, and government regulatory initiatives supported domestic market gas uptake. The report also anticipated robust growth in domestic production, particularly from the Krishna-Godavari Basin, which is expected to reduce reliance on LNG. The city gas distribution (CGD) and fertilizer sectors will continue to drive demand growth, aided by favorable policy support. ICRA anticipated a healthy upturn in demand from the industrial sector due to soft LNG prices and rising domestic gas production. They also noted the positive impact of the Kirit Parikh Committee recommendations implemented in April 2023, which lowered domestic gas prices and improved the cost competitiveness of compressed natural gas (CNG) and piped natural gas (PNG) compared to alternative fuels. Sabyasachi Majumdar concluded by stating that Gas consumption in India is projected to grow by 6-7 percent year-on-year in FY2024, building upon a low base, supported by softer LNG prices and increased domestic gas production. The fertilizer sector will remain the largest consumer, bolstered by the commissioning of new fertilizer plants in H2 FY2023. The CGD sector, particularly the CNG segment, will continue to thrive due to its economic advantages over alternative fuels, as evidenced by strong growth in CNG vehicle sales in recent years. See also: Bangladesh Set to Receive LNG Shipments in September and OctoberIndian Energy Exchange May trade volume rises 8% to 8,251 MU

Next Story
Technology

AirBrick Infra Sets Rs 1 billion Target, Expands to Dubai and Tier-II Cities

AirBrick Infra, one of India’s fastest-growing AI-led commercial interior design and build firms, has announced a sales order target of Rs 1 billion for FY 2025–26. The projection represents a 50 per cent growth over the previous fiscal year and reflects rising demand, increased repeat business, and the company's robust tech-first delivery model.  Now in its third year of operations, AirBrick continues its rapid scale-up, having successfully delivered over 70 projects spanning 3 lakh sq ft in FY 2023–24. FY 2024–25 witnessed the onboarding of several Fortune 500 clients, sett..

Next Story
Resources

Virtusa Foundation Powers Green Education Drive in Bengaluru

The Virtusa Foundation, CSR arm of digital engineering and technology leader Virtusa Corporation, has announced key infrastructure and mobility initiatives at the Ramakrishna Mission, Shivanahalli, Bengaluru. The launch marks the inauguration of a 16-room residential facility for lady teachers and the deployment of two solar-powered electric buses, underscoring Virtusa’s commitment to its core pillars of Education, Environment and Empowerment (3Es).  Located on the forest fringe near Bannerghatta National Park, the initiative supports tribal and underserved communities, complementi..

Next Story
Infrastructure Urban

Godrej Enterprises Drives India’s Smart Green Logistics Shift

As India accelerates its transformation into a global manufacturing and logistics hub, Godrej Enterprises Group (GEG) is taking the lead with its smart, sustainable intralogistics solutions. Through its Material Handling Equipment (MHE) and Storage Solutions businesses, GEG is redefining operational efficiency in modern warehouses and factories using IoT, automation, and AI. GEG has consistently maintained a 20–25 per cent market share in the intralogistics sector over the past three years. Today, over 37 per cent of GEG’s revenues come from its Good & Green portfolio, and its net..

Advertisement

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Advertisement

Talk to us?